In a recent conversation with a client, he did not want to talk about the succession plan per se but about the practical problems arising from trying to implement that plan.

The conversation happened just after I read an article from the NAB, where they expect there will be an $3.5 trillion worth of intergenerational wealth transfer over the next 20 years. The article emphasized one simple rule when dealing with the transfer of business assets: Talk Early, Talk Often!

My client has agreed a succession plan with the co-owner to exit his successful supply business in five years’ time and will sell his share of the business at that time. My client had spent several months discussing that plan with the co-owner and developing strategies for the transition.  Everything seemed straightforward until the plan hit a roadblock.

It turns out the business needs significant investment in premises and equipment to capture future growth opportunities. The problem? My client will bear the short-term costs but the co-owner will reap most of the long-term benefits after the buyout from those investments.

Initially, he was frustrated that he would  effectively be  “subsidizing someone else’s future profits.”

The whole tone of the conversation shifted when I asked him a simple question – “What is the outcome you are trying to achieve from exiting the business?”.

In simple terms he wanted to be debt free and also have enough financial resources available such that he and his wife could live comfortably in their retirement, while also being able to support their children and their families as needed. However, he had little idea of the detail around what these numbers looked like.

Here’s what happened: My client booked a meeting with his financial planner to determine the financial resources he will need to have in place to meet his retirement goals.

This conversation reminded me of a pattern I see repeatedly with succession planning. Business owners dive into the mechanics – valuations, timelines, legal structures – before understanding what they want the succession plan to achieve. While they assume they need to maximise every dollar from their exit, this is rarely the real goal.

My client is now getting clarity on his actual financial needs before making investment decisions in the business. Once he knows what he truly requires to meet his retirement goals, the business investment question becomes much simpler. It shifts from ‘How do I maximize my exit value?’ to ‘What balance serves both my needs and the business’s future?’

The lesson: Before you talk about the mechanics of the succession, get clear on what you want the succession to accomplish. The tactics become much easier when the purpose is clear.